Ideuhs are incipient thoughts

October 2008

October 21, 2008

This evening I had to write a short essay on "My Greatest Accomplishment" for a writing job. It took me a couple of days to figure out what I would be comfortable writing about. I let my thoughts simmer and then this morning it struck me that so far my greatest accomplishment is raising my son. It also provided me a perfect excuse to express some thoughts I had about The Catcher in the Rye a couple of years ago.

I have a theory that changes occur in the brain at key life
stages – such as marriage and the birth of a child – that in fact make it
impossible to single people to fully understand married people, and for people who do
not have children to understand those who do.

It was not until I had a son that I felt I actually
understood The Catcher in the Rye. Having gone to boarding school, I read this book several times during my
youth, and then again in adulthood because I had never been able to figure it
out.Those who have read it will recall
that Holden Caulfield reflects upon an old ballad that goes, “If a body catch a body coming
through the rye.” (It's actually a poem by Robert Burns.) Holden imagines children playing in a rye field near a cliff,
with himself standing at the edge, ready to catch them so they don’t fall
off.

Holden wants to be that catcher in the rye, but why this is
so eluded me until one day I was watching my then much younger son on a play
structure in a park, hovering about in case he should drop off the edge.Then it occurred to me: as parents, we are
all catchers in the rye.

The Catcher in the Rye
is a tale of a somewhat neglected child running away from boarding school to go
on an unsupervised spree through New York City, sneaking into his parents’
apartment at night only to check on his younger sister and grab some
clothes.It is fairly clear that there
is a degree of emotional distance between Holden and his parents.Parenting seems to be the missing element in
Holden’s adolescence; he wishes to be the catcher in the rye, perhaps, because
he wishes for someone to catch him as well.

So is that what The Catcher in the Rye is all about: a wish for parental love? I'd like to write up a longer essay on this, but for now it's nice to ponder that I've become the catcher in the rye.

October 17, 2008

Another inebriated
debate with my Libertarian friend about tax policy.Not much of a debate, really.I had a loose command of facts and figures.The sad fact is I haven’t really examined
Obama’s tax plan.So here it is in a
nutshell: http://www.barackobama.com/taxes/.You can link from this page to a PDF of Obama’s
full tax plan.I think part of the (my)
problem is I have very little faith that any candidate’s tax plan is
necessarily going to meet with reality once they get into office. For example, “According to the TaxPolicy Center, the Obama plan would reduce
taxes as a share of the economy to less than 18.2 percent – thelevel of taxes that prevailed
under President Ronald Reagan.The Obama
plan pays for these tax cuts by cutting spending overall.”OK – there is a huge assumption right there,
considering the $700B and counting that is being shelled out to stabilize the
financial system already.Nevertheless,
I find myself agreeing with Obama directionally.That is, I fundamentally agree that the idea of rolling back tax increases on
the top five percent of earners – note this really is a rollback, not an unprecedented tax hike – while reducing the burden
on the remaining 95% makes sense.My
Libertarian friend thinks this will tank the economy (even further) by disincentivising
entrepreneurs from creating jobs, causing corporations to pass on increased tax
costs to consumer prices, etc.Joe the
Plumber got dragged into it of course, and there was some confusion about
individual income taxes and taxes on small businesses.

So now let me look at
some numbers. This is going to take
several blog posts to sort out – if it is ever sorted out – but at least let’s
take a stab at this.

I was asked if I would
be willing to accept an increase in my taxes should my wife’s and my joint
income exceed $250,000. (Oh! Would it
were true!)I said yes, and my friend
said I was crazy.He said he would make
sure to cap his income at $249,999.I
stuck to my guns – I would be willing to sacrifice for the greater good.My wife was like, oh yeah, at the cut-off
point you get screwed, but people figure out how to manipulate that number to their benefit eventually.Mly wife also astutely pointed out that while federal income taxes have gone down, state and local taxes have gone up because the burden was shifted to them. (Note: Obama's plan includes subsidy-style relief at the state and local level.) Every
tax structure has transitional points where someone is at a disadvantage.Personally, I feel that in general people
want to earn more money, even if at some point their taxes are increased.There are other benefits to earning a higher
salary – for example, enhanced qualification for loans, or even a sense of status
– that may balance out a tax increase.

First of all, let me
confess that I am irresponsibly ignorant of what actual tax brackets are.I’ve been calculating the top tax bracket at
36%, but when I did a search I found it is 35%.I’m sure someone can set me straight on this, but I’m working with 36%
for now.

So let’s say you earn $250K
now and are taxed at 36%.Your tax is
$90,000 and your net income is $160,000.Increase that rate to 39% and you are paying $97,500, netting $152,500. You are paying an additional $7,500 in taxes. To get back to netting $160K, you would need
to raise your income to $262.5K.

Tactically, if I were in
the position of being offered a raise that would put us over $250K, I might
tell my employer, Why don’t we keep it just under that for now.But I would do so with the expectation that
at some point in the future I might receive another raise that might, say, put
me at $260K – still within in the screwable zone. I would take that hit to maintain the upward
trajectory, banking on the dream that I would eventually surpass that
break-even point, and take some practical action to minimize the tax
increase.For example, while until
recently I had been contributing the max to my 401K, I haven’t put any money in
Roth IRAs for years.Theoretically, I
could offset that $7,500 tax increase by $4,000 in deferred investment.The remaining $3,500 I would eat or try to
make up with some other source of income.Perhaps it is a sales commission, or a translation job.This is the alternative economy after
all.In any case, if I’m making $250K, I’m
not complaining.

Now let’s look at this
small business owner situation.I did a
little digging around and as I suspected, an increase in the tax rate for small
business owners earning over $250K is not going to crush the American
Dream.Here are a few figures:

Less than 20% of small
business owners earn more than $100,000, and the median is somewhere around $50,000.
(Guardian: “Courting Joe the Plumber”)

These numbers are close
to figures for individual earnings overall as reported by the US Census Bureau
for 2007: About 20% earn more than $100,000, while the median is $50,223.(Newsweek: “Sorry, Pal, You’re Rich”)According to this article, which discusses
incomes in expensive urban areas, 2.245 million Americans earned more than $250K, or
1.9% of the population.

According to
factcheck.org, McCain’s claim that Obama would raise tax rates for 23 million
small business owners is complete BS.23
million is the total pool of small business owners – as of a 2002 US Census
report.The actual pool is larger, of
course, but the vast majority neither earns close to $250 nor employ any
workers at all.

According to ABC (“Which
Candidate’s Plan Helps Small Business”),
the actual number of small businesses is 27.2 million, out of which 6 million,
or 22% have any employees. It reports that the National Federation of Independent Business found that only 14% earn more than $200K.

An interesting article
on Gather.com (“Who Makes $250,000 a Year? Not Small Business Owners”)
categorizes those who might earn more than $250K and very few of these are
necessarily directly employing workers in a business.For example, corporate executives and
marketing or sales people are not small business employers – they work for
companies.High-earning professionals
such as doctors and lawyers are generally affiliated with larger organizations
such as law firms and hospitals.And so
on.

Where is this leading me? Based on the above, I am guesstimating that maybe 10% of small business owners - that would be some 2.7 million entrepreneurs - earn more than $250K and have employees. The missing number would be how many employees we are talking about here. I suppose I'll have to do a little more digging.

My Libertarian friend
insists that Obama will actually increase the tax rate for top earners to
50%.I did not know where he pulled that
number but poking around I have seen commentary that the combination of income
tax and social security tax would make this so.But I can’t get my head around that now so that will be for another
blog.

October 15, 2008

John McCain: "There's a lot of things that have been shouted out at your campaigns that I haven't been too happy about either."Me: "Such as?"Well, OK, Stephanie Miller has been calling him Grampy McSane. McCain: "Let me say categorically that I am proud of the people who come to my rallies. I am not going to stand for anybody saying that the people who come to or rallies are anything other than patriotic citizens."He mentioned something about not standing for Obama insulting the decorated veterans who appear at his rallies. I never heard Obama do that. That was fairly typical of the self-righteousness and condescension coming from McCain this evening. In general, I felt that the tone and manner of his performance tonight made it apparent that he is simply running on distortion, and hoping that if he contradicts the facts frequently enough, the uninformed will just believe him.

October 13, 2008

Is it just me or is it odd that the morning after I wrote about Paul Krugman on my blog and linked to his blog, I read in the New York Times that Krugman Wins Economics Nobel?

This morning I ended up tearing out dead grass from my lawn and reseeding it. I hadn't planned on getting around to it until later but the gardener and his crew had discovered the seed bag and were about to take it upon themselves. It wasn't something I would have asked of them as it is back-breaking work that is outside their normal routine, plus it's one of those things I know they're going to screw up if left to their own unsupervised devices. Like they way they take it upon themselves to prune down trees to half their height, or brutally shear back the star jasmine just as it's about to flower. I chose this guy because he is Japanese and I had some fantasy about Japanese gardeners being top notch. So it was me and the crew weilding picks and hoes - and of course one of them impaled a sprinkler line, causing a puddle at the edge of the lawn and making me drive off to OSH for replacement pipe.

I'm really not sure why or how this guy ended up in Palo Alto - it seems like it would be the equivalent of me moving to Tokyo and starting a gardening business - but here he is, and I've never had the heart to let him go, except for the first month I was laid off and worried about finances. But Reader #1 - my mother-in-law - kindly offered to pay for the rest of the year. At any rate, the job got done a helluva lot quicker with four people. Let's just hope the seed takes root.

October 12, 2008

I'm pleased to say my blog audience has grown by 25% since last month with the addition of a fifth reader. Welcome WT! I would also like to take this moment to acknowledge Reader #1, my mother-in-law. WT correctly noted that I had incorrectly attributed Roosevelt's line - "There is nothing to fear but fear itself." - to Churchill. But, come on now, Roosevelt had to have gotten that line from his grandmother. Or, like Biden, might have lifted it from another British politician. Hey - maybe it was Churchill after all! If Roosevelt had lived in the age of TV and gotcha journalism, he would have ended up having to defend himself against accusations of plagiarism: "Seriously, I've attributed that quote in every stump speech...I just dropped the ball this time." Speaking of TV and Biden, how on earth did my favorite senator come up with the idea of Roosevelt appearing on TV to address the American public about the Great Depression? That was a doozy. But ancient history by now. I really should be blogging every day.

Truth be told, this blog is going nowhere fast. I need to work on something a little closer to home, which is why I'm contemplating a second blog on life in Silicon Valley.

It actually is somewhat interesting to be past forty and staring at a financial meltdown. Add to that the excitement of the current election cycle and my increasing nausea over the ugly turn it has taken at the hands of Sarah Palin (see: "McCain tussles with Palin over whipping up a mob mentality") and, as my wife and I agreed late last night, it really does feel like we are experiencing a historical moment. It probably makes sense to be a little more observant of the everyday changes going on around me, despite the fact that things seem eerily normal in my suburban enclave. Like, why do I keep seeing my fellow dad across the street who works at HP tinkering with his car on weekday afternoons?

Seriously, hearing people in McCain/Palin audiences yelling "Kill him!" and "Off with his head!" makes me wonder what we are headed for when and if Obama wins. Watching McCain have to defend Obama against his own supporters and get booed for doing so, my sense is that he himself is surprised at what his campaign has dredged up. Frankly, I'm predicting some ugly street scenes in 2009.

Speaking of predictions, Paul Krugman predicted this whole meltdown months ago. I know there was a column at least a year ago in which he provided a blow-by-blow narrative of how the whole thing would unravel and I want to go back and check how close he came if I can track it down. I believe that was "The Big Meltdown" of March 27, 2007 but the content of that link is actually some introductory copy written February 2008 about how Paul Krugman concluded a column published on March 2,
2007, which described how a financial meltdown might happen, by hedging
his bets, declaring that: “I’m not saying that things will actually
play out this way. But if we’re going to have a crisis, here’s how.”

So until I unravel that one, here are a few prescient pieces from the last year that illustrate why he is my favorite popular economist and why I am adding a link to his blog to the right-hand column (maybe I should move that to the left):